Secrets and spies

A surveillance system that intercepts communications
has become the latest focus of dispute between the US and Europe

By Thomas Catan

Long after most people thought spies had gone into post-cold war retirement, espionage has emerged as
one of the most serious irritants to transatlantic relations since beef and bananas.

As Bill Clinton, the US president, tours European capitals this week, the European parliament is preparing a
year-long investigation into allegations that the US -- with the help of Britain and other English-speaking allies --
not only spies on foreign companies but feeds its intelligence to US corporations. Next Thursday, European
parliament leaders are due to vote on the composition and terms of reference of the inquiry.

The claims have touched off a storm in France, and again highlighted suspicions that Britain's loyalties remain
divided between America and Europe. That the US eavesdrops on foreign businesses is not in doubt. So, for
that matter, do other countries, including France. But whether Washington uses the information to gain
underhand commercial advantage over its western allies will be much harder to prove -- not least because
economic interests and national security have become so closely entwined.

At the centre of Continental European anxieties is a global surveillance system, operated by the US, Britain,
Canada, Australia and New Zealand, that intercepts millions of phone calls, faxes and e-mails each day.
Codenamed Echelon, it consists of about 10 listening posts worldwide, including at least one in the UK. Data
carried by satellites, microwave transmitters and underground cables are searched by computer for keywords;
selected data are then sent to the US National Security Agency in Fort Meade, Maryland.

What happens to the information once it reaches the triple-fenced compound at Fort Meade is a matter of
dispute. In an extraordinary public hearing of the Senate intelligence committee last month, Lt Gen Michael
Hayden, director of the NSA, acknowledged that the agency examined intelligence relating to weapons
proliferation, money laundering and corporate corruption. But both he and George Tenet, director of the CIA,
denied that the information was passed on to US companies.

"There are instances where we learn that foreign companies or their governments bribe, lie, cheat and steal
their way to disenfranchise American companies," Mr Tenet said. But complaints were always taken up with
foreign governments -- not the offending company, he stressed: "We play defence. We never play offence."

That distinction can be hard to maintain. The report submitted by British journalist Duncan Campbell to the
European parliament in February cites two instances in which US companies are said to have benefited from
government espionage. In 1994, the report alleged, the US intervened in a Brazilian tender for a Dollars 1.3bn
surveillance system after the NSA intercepted evidence that Thomson-CSF, the French defence contractor,
was offering bribes. Raytheon, the US defence company, won the contract. In the second case, NSA found that
agents for Airbus, the European aerospace consortium, were offering bribes to a Saudi official. The Saudi
government was alerted; Boeing and McDonnell Douglas won the Dollars 6bn contract.

Neither case directly contradicts the US's insistence that it uses intelligence only to "level the playing field" in
cases where the bidding process has been corrupted. The European Commission and the European
parliament have called on companies that feel they have been the victims of espionage to come forward; none
has yet done so. But suspicions persist.

The US's emphasis on economic security began under the Bush administration, but appears to have been
taken up with renewed vigour by the Clinton White House. Warren Christopher, then secretary of state, declared
in testimony before the Senate foreign relations committee: "In the post-cold war world, our national security is
inseparable from our economic security."

To address that new priority, US intelligence support was extended to commercial organisations in 1993
through the creation of a National Economic Council, which mirrors work of the National Security Council. Two
years later, the White House National Security Strategy focused on economic security as a national priority.
Ron Brown, the late commerce secretary, also set up a business "Advocacy Center", which reportedly
combines intelligence with other trade and economic data.

One result is the CIA's Daily Economic Briefing, also created under Mr Brown. Though highly classified, the
document is thought to contain a large amount of publicly available information, supplemented by information
from intercepts.

But general economic intelligence will at times involve company-specific espionage. For example, it is likely
that most arms deals are targeted by Echelon. And as Jeffrey Richelson, senior fellow at Washington's National
Security Archive, points out: "There you're at the junction between trade and national security."

In addition to formal channels for passing information between government and US companies, informal
contacts also take place. Most heads of the CIA and NSA join the boards of US companies once they leave,
keeping one foot in the world of intelligence and another in corporate America.

Many former directors of central intelligence (DCIs) maintain a contractual relationship with their former
employers. "They have a contract with the agency to allow them to continue to come in and consult on a
case-by-case basis as required by the president or a subsequent director of intelligence," a CIA spokesman
says. However, the official adds, DCIs are bound by federal post-employment regulations and, in any case,
would need to demonstrate a "need to know" before being granted access to any intelligence.

Such safeguards are insufficient to allay the fears of the European parliament. "The temptation to more than
'level the playing field' must be absolutely enormous," says Glyn Ford, the MEP who originally commissioned
the report on Echelon.

Nevertheless, Europe's complaints may be overdone. First, there is the potential for scandal. NSA got badly
burned in the 1970s when it was found to have been eavesdropping on US opposition figures such as Jane
Fonda, Martin Luther King and Eldridge Cleaver, the Black Panther leader.

Second, there is the question of who to help: with the rise of multinationals, it is getting harder to decide which
companies are truly American.

Last, doubts remain as to whether any Echelon-like system would be capable of intercepting the enormous
volume of global electronic messages. The NSA has been affected by personnel and funding cuts just when its
targets have been increased, worldwide communications have exploded, and private encryption is becoming
commonplace, says Steven Simon of the London-based International Institute for Strategic Studies.

To many, the transatlantic friction is symptomatic of deeper issues. In part, it reflects widespread anxieties
about the loss of privacy in the information age. More importantly, the European protests should be seen in the
light of rising tensions about several issues: national missile defence; European plans to create an EU military
force outside of Nato; the conduct of the Kosovo war; and trade.

"This is not anxiety about the arcane field of signals intelligence so much as it is concern about apparent
American hegemony -- whether it be aircraft or hamburgers," says Steven Aftergood, of the Federation of
American Scientists.

Steven Simon, of the IISS, agrees: "The general conviction that America wields too much power too heedlessly
has helped animate the fury over Echelon. The lesson should be that Europe and the US had better start talking
more constructively about the issues that divide them."